Archive for the ‘borrowers’ Category

There is a simple way to address our current housing crisis – the sale of distressed properties could be easily slowed or stopped with ONE SIMPLE STEP. Banks need to write down the loans on homes that are underwater and allow good borrowers to refinance at today’s lower interest rates.

The most distressing things for most homeowners is that their homes are so UNDERVALUED that they will NEVER see a time when their home will be worth what they owe on it. It’s a reality and it is discouraging. Banks can start to turn the economy and housing around by going to people who are not in distress and beginning the process of re-evaluating value and re-negotiating outstanding balances to make home ownership attractive. To ignore this is fact is going to result in increased defaults and more short sales and foreclosures. It’s going to happen!

Recently, Moody’s released the following statement on the sale of foreclosed homes: They found that on average, a foreclosed property will be valued about 18 percent lower than average home prices, and will be subject to an additional sales discount of about 15 percent.

The banking industry is creating the depreciation of home values when they are personally responsible for the sale of homes at 30% less than fair market rate resulting in the downturn in value on surrounding homes. Banks are making a bad situation worse. I am shocked that no one seems to address this issue in the media or in Congress.

Who wins? Investors. Who loses? Everyone else – especially the American public.

If this fact is true then why not reduce the principal balance on underwater loans by 30% thereby rewarding homeowners who choose to stay in their homes and pay their mortgages. Does anyone really think that people are going to pay their loans out of a sense of obligation and responsibility? Seriously? I predict a mass exodus as people figure out that they are better off renting and getting out from a debt they can never actually pay off and for which their home will never be worth.

Let’s get serious about solutions to real estate and the housing crisis. Do I think this is going to happen? Hell, no. We have a government that is ineffective and impotent and a banking industry getting rich on investments. The American public continues to struggle with no one reaching out a helping hand. Is there anyone out there who can make a stand for the people?

Just when you thought it was safe to jump back into the water…oh the dread.

I’m not really talking about sharks in our oceans – I am talking about the jumbo loan sharks and the debacle that is looming. Looks like the federal government is going to take a hard line on these jumbo loans and really cut off the people in the $500,000 to $1M loan category at the knees. Be prepared for a bucket load of strategic defaults with Sellers jumping overboard.

It is getting harder and harder to get any loan. But now Congress is working to get out of the high-end market (so called “jumbo” loans) and try the new “private banking” rescue of our homes for luxury properties. The result for many will be higher cost loans and fewer buyers for more expensive properties. To be clear, there are buyers and sellers in this price range but they can’t do it without a loan at this “mid-range” luxury price point.

In homes priced over one million, we see more cash buyers. But I call this mid-range group ($500K – $1M) as being in real estate purgatory. They are losing hope and they are losing hope fast.

Michael S. Barr, a former assistant Treasury secretary, said the federal government’s retrenchment would be painful for many communities. “There’s always going to be a line, and for the person just over it it’s always going to be an arbitrary line,” said Mr. Barr, who teaches at the University of Michigan Law School. “But there is no entitlement to living in a home that costs $750,000.”

The problem with this logic is that it will trickle down and affect the entire housing industry. This is the start of some difficult times in the lending market and I believe we may witness many people bailing out of these homes to become renters. Watch for an increase in strategic defaults. I’m already seeing it from the perspective that I have more tenants on hand than high-end buyers. This could be catastrophic.

I don’t see private banking coming to the rescue. Why? Because the federal government is still going to tightly control bank reserves which further decreases loan availability. I would love to see someone with some real economic credentials figure out how badly this new policy could affect our ENTIRE housing industry.

In short, this could blow a lot of people out of the water. Sending out an SOS…

As I was driving through a luxurious Orlando neighborhood recently, I noticed a number of homes that were obviously in foreclosure. The signs were everywhere including the overgrown lawns, the newspapers piled in the driveway and the general look of decay.

It dawned on me that without proper love and care – the earth has a way of reclaiming what it once lost. The house was covered in vines which were starting to smother the home. It was at once appalling and then again, mesmerizing. I guess the old adage “it’s not nice to fool “Mother Nature” really can come true. You can lay down all the bricks and mortar that you need to make a mansion or a modest home but left untended, Mother Nature is going to take it back and do so with a vengeance.

So goes the state of real estate. Real estate in the US is in ruins! No one is tending the real estate market and no banks, politicians or even news anchors seem to be alarmed. Banks have just disclosed that they wrote one-third (1/3) fewer loans the first quarter of this year than in the past. That is an ASTOUNDING fact. While is sounds wonderful to have a 4.45% interest rate, it is meaningless if no bank is giving out loans. It’s catastrophic. Right now we live in a world full of smoke and mirrors. It’s all fake advertising. It’s all for naught.

Banks are getting richer and bank CEO’s are reaping huge profits but not on real estate. Our country must stand up for a call to action for loans to be written to credit-worthy customers. We are in the weeds and we are going to be in a hole so deep it will take decade(s) to recovery.

As real estate goes – so goes the economy. As an example, I had a client with a two-year old foreclosure BUT $100,000 down payment on a $200,000 house and I could NOT get him a loan. Why? Because the lenders said his foreclosure had to be past three years. 50% down is almost unheard of and yet we could not get this buyer a loan.

PLEASE, please won’t someone get serious about the condition of our economy and realize that without loans and without buyers – we have no real estate? The effect is deep and sinks to the core of all business. No real estate builders, no real estate materials (bricks, shingles, asphalt, etc.), no handymen, no appliances, no furniture…I could go on and on. The lack of sales is affecting everyone and it is affecting you whether you understand this or not.

Let’s get back to business. Let’s sell some homes. Won’t someone make a stand?

There was a popular game show once that gave contestants the option to pick door number one, two or three to gamble on attaining a prize. Sometimes it was a car and sometimes it was a donkey. It was all about a game of chance and whether the contestant would win a grand prize or a booby prize.

Well…welcome to real estate in 2011. We have options but some are grand and some are not so grand. It all depends on what we are going to pick.

Through one door is the road to recovery with lenders writing loans, revamped credit scoring system and someone realizing that trying to negotiate settlement on loans is better than foreclosing on half of American homeowners?

Yet another door is this constant tease of do we foreclose or not because the court system has reacted in a crazy manner to the even more INSANE behavior of attorneys in the foreclosure process. We are witnessing – for the first time in recent history – the complete and absolute breakdown of our judicial system and the ethics of the legal profession. Insanity reigns.

Finally we have the banks. I could write a massive epistle on the sins of our lending institutions. From a real estate perspective, it seems no one knows what they are doing when it comes to banking. Even bankers are in a flux with the Mortgage Banking Association strategically defaulted on their own office building. No one in the news seems to discuss this very much. Oh the irony! In other words, the main organization that represents the banking industry walked away from their debt rather than repay their own bank loan.

I don’t know which door to pick because I don’t know if we have a sane person left running the (a) our country, (b) banks or (c) Wall Street. From my perspective, it all looks like a booby prize right now behind doors one, two or three. Won’t someone prove me wrong?

A client asked me today when he was going to hear some good news. When was he going to hear something positive about the real estate market? He was tired of hearing that his home isn’t selling because no one is buying. I feel his pain.

But here’s some simple truths. There is good news. It’s the old silver lining in every cloud syndrome and I think it bears repeating.

1. THINGS WILL GET BETTER. Once we work our way out of this (and I think it will be sooner than later) – the housing industry WILL recover and we will have a stable and secure real estate market. Will it happen tomorrow? Unlikely. But could it happen THIS YEAR? Very likely.

2. HOUSING IS STILL A GREAT BUY. Rates are ridiculously low and prices are even lower. If you EVER wanted to own a home – buy now. BUY…BUY…BUY. Homes are listed at crazy low prices. I can tell you this, investors are buying and they are going into the rental market. Smart people see the opportunities. Other people see problems. Be smart!

3. ENJOY YOUR HOME. Life is not only about the bottom line. If you loved your house before…you will still love it now even if it isn’t worth as much. It’s STILL YOUR HOME.

4. LEARN TO COPE. Life has its ups and downs. Good times and bad times. But hey…we are still here, we still have a roof over our heads and the sun will come up tomorrow. Enjoy.

In today’s real estate world…financing is critical. It is often the difference between deal or no deal. So, how do you make it work? There are a number of factors to consider:

Is the buyer’s lender local and reputable?

Has the buyer been pre-APPROVED?

Is there a significant down payment?

Will the house appraise?

Without a yes answer to the above questions, your contract could be in jeopardy. It is always important to work with a lender who properly qualifies prospects, No ambiguous language allowed on that pre-approval letter (look for the “out” clauses”)! Make sure you actually talk to the lender and find out the specifics on the borrower. Is the buyer putting down some funds…money talks in this market and deals are done when the buyer has contributed to the bottom line. Finally, is the home priced right? In today’s market…we don’t want to be a part of the problem.